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on trade, tax cuts, and infrastructure spending. (1) The doves at the Fed have been silenced as, under President Trump, the US policy mix will likely be less lop-sided and the emphasis will be on Arrow 3, with Arrow | being downgraded. I think the effective demotion of the Fed has just begun. Its independence will likely be challenged, as it should be, in my personal view. November 8 marked the beginning of the end of the financial repression in the US. (2) Generating outsized economic growth will be key to settling several important inconsistencies in macro. I will elaborate on this point below. But the market trends witnessed since November 8 will not be sustained unless Mr Trump’s policies indeed lead to significantly higher nominal GDP growth. (3) The mainstream media remain negative on Mr Trump, but this will keep the hurdle low, and in turn pressure President Trump to deliver early in 2017 and thus for him to impress favourably. A shift away from identity politics, in my view, based on my personal experience from Taiwan, should lead to positive economic progress. Investors won’t need to wait long for there to be more concrete announcements on the various parts of Arrow 3, including both the content of the policies as well as their sequencing. (4) FWIW, my two policy recommendations to the reformers are (1) design an effective global taxation scheme to properly tax multi-national corporations and (11) adopt industrial policies to help countries focus on their comparative advantages. The US, UK, Japan, and Italy are all prime candidates to do (11). (5) The dollar is already moderately over-valued, but this will not prevent it from strengthening further, especially against the EM currencies. Think in terms of ‘growth alpha’ and ‘growth beta.’ Much of EM, including China since February of this year, have not possessed ‘growth alpha’ and have continued to rely on ‘growth beta’ vis-a-vis the rest of the world. I struggle to think of key reforms that EM countries have embarked on in recent years: even countries like France and Italy have undertaken more reforms than most EM countries. Squeezed by (i) a more hawkish Fed, (i1) a China that will continue to soft land, and (111) a potentially more inward-looking US, EM will struggle without ‘growth alpha.’ I think we may be entering into a period of differentiation among the EM markets: those that have ‘growth alpha’ will be rewarded while those that continue to rely on ‘growth beta’ will not. (6) The world according to Trump will be more Darwinian for countries and less Darwinian for US citizens.This notion applies to investing in EM, to countries’ growth prospects, and to international competition — (potentially) very different from the last few years, when ‘the Fed was the only game in town’ and everyone and everything floated higher by central bank liquidity... In any case, the dollar should be in a good position to thrive, I think. Economic Olympics. The markets are no longer driven only by the Fed and central bank policies, but by forward-looking policy inclinations. The ‘false economy’ that central banks have nurtured will gradually be replaced by real HOUSE_OVERSIGHT_026638